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A turnaround in the outlook for value would mark a stark change from the recent past. Rob Arnott explains why this is likely in an extended Q&A.

By Robert Stowe England

Value stocks have been underperforming the market for most of the last 12 years. Their recent performance relative to large market cap benchmarks is well below historic norms. This might lead investors to think they should avoid this sector. Think again, suggests Rob Arnott, chairman and founder of Research Affiliates of Newport Beach, California. “When value gets as cheap as it is now in the U.S., historically it has beat growth by 4% a year over the next four to five years,” Arnott says. This projection comes with roughly a 5% uncertainty factor, which means it could be 5 percentage points higher or lower. That would mean “somewhere between zero and 10%,” Arnott says. “Oh, I’ll take that bet. The low end of the spectrum of the range is zero.” Emerging market value is even cheaper by historic norms. “The expected ou…

A shift into small caps in the spring is reaping big summer rewards
By Robert Stowe England
Investors have been increasing their stakes in small cap equities since mid-May, according to EPFR Global, a Boston-based firm that tracks the performance of $38 trillion in mutual funds and ETFs. During June, net inflows into small cap funds rose to around $10 billion a week and have continued at the pace through mid-August.
The move into small caps that began in May has given investors in this sector a significant bonus. "This year small caps as a fund group are the best performing through the first week of August,” beating large cap and mid cap, according to Cameron Brandt, director of research for EPFR Global. The performance premium for small caps began in March and then took off in May and has continued into August.
Optimism in the small business sector of the U.S. economy has been rising since late 2016. The Small Business Optimism Index rose to 107.9 in July. It was the second-h…

Portrait of John B. Stetson by Irwin Benoni, 1895. Credit: John B. Stetson Company.
Chapter Eight
Sitting on Top of the World Note: This sample chapter is from the forthcoming book Stetson: An American Icon

After conquering the West, the rapid growth of John B. Stetson &Company after 1880 propelled the company toward another accomplishment – becoming the largest hatter in the world. While there are no historic data on the number of hats sold for most of the 1880s and 1890s, available information on earnings growth sheds light on the company’s rapid ascent up the ranks of hat makers. Starting from a net annual profit of $70,136 in 1879, Stetson’s earnings more than doubled to $185,457 eight years later in 1887. By 1890, profits were sharply higher at $332,624 on an estimated $1,330,000 in revenues.Based partly on those revenues and its ever-expanding factory complex, Stetson would claim in 1891 that it was the largest fur felt hat maker in the United States.In the…